Governments around the world are giving up on net zero. But when will our own politicians see the light?
To grasp why Australia may be the last country to face up to reality, we first need to understand what’s gone wrong elsewhere…
In the UK, the former government was busy rolling back net zero initiatives for almost a year before getting the boot.
The new UK Labour government certainly looks committed to net zero. But nobody takes their targets seriously. Even the unions that give Labour its power base described the party’s net zero plans as ‘Nothing but zealotry’.
The US looks set to elect outright climate change sceptics into the White House.
The Germans are ripping up entire towns to get at the lignite coal underneath. They may have a target to end coal, but they very carefully haven’t made it a law. So, if you look at what they are doing instead of saying, the energy transition has come full circle.
Things are so bad in Germany that the Swedes recently rejected a subsea power cable connection. Germany’s electricity market is such a bizarre mess that the Swedes don’t want anything to do with it.
Remember, such interconnections are the key to the renewables-based system, because it’s always sunny and windy somewhere…right?
The Italian Energy minister has admitted that renewables can’t do the job. They don’t provide the energy security needed. And so nuclear will be phased in 34 years after getting phased out.
The French have flat out rejected the EU’s renewables targets, at risk of sanctions from the EU!
So, what do all these countries have in common?
Free energy is just too expensive
Government budgets around the world are simply too overstretched to pay for net zero. The vast and absurd costs that are being exposed by countries leading the energy transition have frightened the pants off politicians everywhere.
The cost of the vast infrastructure projects needed to make renewables less intermittent is truly mind boggling. And you can only pretend the private sector will pay for it all for so long. Especially if you’re busy shuttering fossil fuel power.
You might’ve noticed that the UK was the first to turn on net zero policies under the Sunak government. Well, how did Rishi Sunak get elected in the first place?
He was elected by the bond market, where governments borrow their money.
The previous prime minister Liz Truss had triggered a bond market crash by spending too much money on energy policies and cutting taxes. And so, she resigned.
As is the tradition in Europe during a sovereign debt crisis, a Goldman Sachs alum was helicoptered in to stabilise things. And he set about undoing key net zero policies.
Why? Because they cost a fortune.
My point is, it was pressure from the bond market that caused a shift on net zero. The delusion began to actually cost a lot of money. And the bond market balked at financing it.
Even the UK’s Labour Party understood this. It suddenly cut its proposed net zero budget by half. The plan they were elected under spends just £15 billion on green projects a year. A laughable amount relative to the projected cost.
How will Labour square the circle now that they’re in government? They won’t. At least, that’s what the bond market is presuming. For if the government try to spend big on net zero, they could find themselves on the back benches like Liz Truss.
It’s the same in other “financially challenged” economies.
Japan was called ‘the land the energy transition forgot’ by the Japan Times. Because, at an all-time record-breaking debt to GDP of 263%, it can’t afford anything but nuclear power and gas. Not on the ground, anyway. In government projections and commitments, renewables still play a crucial role, of course…
The Italians are the debt domino that’s threatened to fall for years now. And so they’ve lost interest in expensive renewable energy too.
The French bond market wobbled during the recent elections there. The government knows it is close to a fiscal crisis, with out-of-control deficits. So, it is sticking with the existing nuclear fleet.
But we aren’t Europe. Our debt to GDP ratio is low and falling. So why worry?
The trouble, ironically enough, is that…
Australia can afford to sustain
the delusion much longer
Politicians that are under financial pressure at least behave like money matters. Any new policy announcement could be their last, as it was for Liz Truss. So, they make sure it’s affordable.
But our politicians have plenty of fiscal room to get us into trouble. For a lot longer than other Western economies.
The result could be an energy system disaster that makes the Germans look good.
Until next time,
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Nick Hubble,
Editor, Strategic Intelligence Australia
PS: The Chinese know the Europeans and Americans have their backs to the financial wall. That’s why they’re stocking up on the only resource which can protect you from the consequences.
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